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BRIEF OF JUDGEMENT OF DIFFERENT COURT CASES IN RESPECT OF ASSESSMENT/COLLECTION OF CESS FROM  TEXTILES & TEXTILE MACHINERY MANUFACTURERS

  1. The Hon’ble Supreme Court of India in the matter of M/s. Sirsilk Ltd. vs. Textiles Committee & Ors. (Civil Appeal No.863 of 1973), inter-alia, has upheld the legality and validity of the Textiles Committee Act, 1963 in respect of assessment and collection of Cess from the manufacturers of textiles and textile machinery.

  2. The judgment in respect of Textile Processing Units

  1. Since the definition of manufacturer has not been defined in the Textiles Committee Act 1963 as amended in 1973, the processors were clarified their status as manufacturer taking into account the decision given in the Hon’ble Supreme Court in the matter of M/s. Sirsilk  Ltd. Vs. Textiles Committee & Ors. (AIR 1989 SC 317) as under:-

    The Hon’ble Supreme Court of India has considered the scheme of the Textiles Committee Act, in the case of
    M/s. Sirsilk Ltd. and others Vs. Textiles Committee & Ors (AIR 1989 SC 317) and held that the Industries (Development & Regulation) Act, 1951 and the Textiles Committee Act, 1963 can be considered to be statutes  of Pari Materia.  The object of either or these two acts is to protect and to assist in the development of textile industry.  In the first schedule to the Industries (Development and Regulation) Act there is a list of Industries engaged in the manufacture or production of any of the article mentioned under each of the headings or sub headings.   In item No.23, Industries viz. Textiles are covered and read as under. “ ‘23’ Textiles (including those dyed, printed or otherwise processed)”.   Thus processing of textiles amounts to manufacturing.

  2. The Hon’ble Supreme Court in the matter of M/s. Ujagar Prints – Vs- Union of India & Ors. (AIR 1989 SC 516) has conclusively held that job work carried out by the Independent Processors amounts to manufacturing of textiles and therefore falls under the purview of Central Excise.  Textiles Committee Cess, being in the nature of excise duty, is therefore applicable to the Independent Processors.

  3. In the case of Nath Bros. Exim. International Ltd. –Vs- Union of  India & Ors. (AIR 1997 Delhi 383) the Hon’ble Delhi High Court has clearly opined that the materials claimed for exemption of Textiles Committee Cess should directly come, in finished form, from the Powerlooms (less than 50 looms) and handlooms,  and should  not under go any further processing.   The processed materials thus attract the Textiles Committee Cess.

  1. Collection of Cess – Exporter of Textile Garments manufactured from Textiles. 

In the case of Nath Bros. Exim. International Ltd. –Vs- Union of India & Ors. (AIR 1997 Delhi 383) the Hon’ble Delhi High Court has held that though the term ‘manufacturer’ is not defined in the Act, definition of manufacturer in Central Excises Act, makes it clear that expression ‘manufacture’ includes on any process ancillary to completion of a manufactured produced and the word manufacturer includes not only person who employs hired labour, in manufacture of goods but also any one who engages in their production or manufacturer on his own account, if those goods are intended for sale.   It is also stated that inclusion of the expression “exporters” in Section 12 makes the legislative intent abundantly clear that the exporters are also covered under the Act.

  1. Assessment and collection of Cess in respect of RMG/Hosiery  Manufacturers.
  1. The Hon’ble High Court of Judicature at Madras in the case matter of M/s. South India Hosiery Manufacturers’ Association, Tirupur –Vs- Textiles Committee & Ors. (WP No.8085 of 94 and WMP No.12301 of 94) has upheld the collection of cess on Garment/Hosiery by the Textiles Committee under Textiles Committee Act & Cess Rules. The gist of the order is as follows:

  1. The levy and collection of Cess from Garment/Hosiery manufacturers in terms of Section 5A was neither illegal nor arbitrary.

  2. The “manufacture” covers also conversion of any form of textile goods into another such form and the word “manufacturers” includes also all persons who employ hired labour or who engage in production or manufacture of textile goods on their own account.

  3. Upheld the collection of Cess from all manufacturers irrespective of the fact as to whether they are covered under organized or unorganized sector.

  4. The action of Assessing Officer in collecting the sales turnover figures from the Commercial Tax Department for assessment cannot be said to be an erroneous one, in the absence of returns.

  5. The time limit of one year stipulated in Rule 10 of Cess Rules is nothing to do with the submission of returns and payment of cess by manufacturers of textiles.

  1. The Hon’ble High Court of Judicature at Bombay in the case matter M/s. J.K. (Bombay) Limited vs. Union of India & Ors. (WP No.160 of 1995) has also upheld the collection of cess from RMG manufacturers.

  1. Assessment and Collection of Cess in respect of 100% Export Oriented Units.

The Hon’ble High Court of Judicature : ANDHRA PRADESH AT HYDERABAD in the case matter M/s Sanghi Spinners India Ltd. –vs- Union of India & Ors. (WP No. 18171 of 2000) has upheld  the policy decision of Govt. of India not to grant exemption  to the 100% EOUs from payment of Textiles Committee Cess.

  1. Time limit for the purpose of assessment of Cess.

The Textiles Committee Act does not prescribe limitation for the purpose of assessment of cess.  Hence, the law of limitation does not apply to Textiles Committee. The Hon’ble Supreme Court of India in the matter France B. Marines V/s. Mafaida Maria Teresa Rodrgnes (reported in 1999 AIR SCW, pg.3216) has held that when the legislative in its wisdom thought it appropriate not to prescribe the period of limitation for proceeding under the Act, the Court cannot apply the provision by implication

  1. All the 100% EOU engaged in manufacturing of textiles and textile machinery are liable for submission of returns and payment of Cess.

As per the provision of the Textiles Committee Act & Cess Rules, all the manufacturers of Textiles & Textile machinery are liable for submission of returns and payment of Cess.    Few manufacturers who concentrate under the category of 100% EOU in terms of Industrial Resolution issued by the Ministry of Commerce were having doubt that they are exempted from Cess.   M/s. Nagareeka Exports Ltd., one among the 100% EOU manufacturing textiles had approached the Tribunal as well as the Hon’ble High Court of Mumbai  aggrieved by the assessment of Cess carried out under the Act.   However, Hon’ble Tribunal & Hon’ble Divisional Bench of High Court upheld the collection of Cess under the Act and dismissed the petition by order dtd. 28.2.03.  The gist of the order is as follows:

In view of the above judgment , all the 100% EOU engaged in manufacturing of textiles and textile machinery are liable for submission of returns and payment of Cess.

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